Since the dawn of e-commerce, it's been easy for companies to gain as many new customers as they can handle, thanks to the influx of users to the Internet. However, that influx is running out, and e-tailers had better get out in front of the trend.
Legend has it that the inventor of chess was so
wise that when the king asked him to name his reward, he replied that
he only wanted one grain of wheat for the first square, two grains for
the second, four grains for the third, eight grains for the fourth and
so on up to the sixty-four squares on the board. The king readily
agreed, thinking it a ridiculously low reward for such an amazing
invention, but then was later advised by his treasurer that he owed the
inventor more grain than could be produced by the kingdom in 10,000
And what does this tale have to do with the
online shopping experience? Simply that assumptions about geometric
growth can get you into serious trouble. Look specifically at the
growth of online shoppers. According to a 2008 Pew Report,
the percentage of Americans adults who have ever purchased something
online has grown from 22 percent in 2000 to 50 percent in 2006 -- an
annual growth rate of about 15 percent. Now, if you continue to project
15 percent growth each year you get to 102 percent by 2011!
Clearly that's impossible. The growth of new online shoppers must slow
down because at some point everyone who is going to be shopping online
is already shopping online. And in fact, it's probably already
happening: Growth from 2005 to 2006 was about 8 percent. Growth from
2006 to 2007 was negative 2 percent! (Yep -- that's not a mistake! The
population of American adults continues to grow but the number of
online shoppers did not grow as fast).
So what does all this mean? During this past decade, e-commerce has
grown like weeds because of the massive influx of new online shoppers
as the population has (a) gone online and (b) started to shop online.
In 2000 (again according to the 2008 Pew Report), only 48 percent of
American adults were even online in the first place. By 2007, that
number had grown to 74 percent. I'm speculating now, but I suppose that
new online shoppers have tended to gravitate toward retailers that they
already know and trust from shopping their stores or catalogs. The
brands that had already built a relationship outside the Web have
gotten a free ride as America has become wired, resulting in awesome
growth and profit despite relatively minimal capital investment.
No Free Ride
But now the free ride is over. As the tidal wave of newbie online
shoppers ebbs to a trickle, further growth will only come through
retaining existing shoppers and poaching new shoppers from your
competitors (who of course are trying to do the same thing to you).
Winning will be less about scooping up souls from the search engine
marketing soup and hoping that a few will purchase something, and more
about paying very close attention to what happens to your visitors once
on your site. Patti Freeman Evans at JupiterResearch has been writing about this for years.
In other words, it all comes down to user experience. Basically,
we've been treating online customers pretty badly since the birth of
the Web. A 2 percent conversion rate means that 98 percent of a site's
visitors didn't buy anything. Why do we feel that's acceptable? How
many of that 98 percent were confused, dissatisfied or annoyed? In a
store we'd see a shopper's pain face-to-face; on the phone, we'd hear
the stress in her voice; but the Web lets us keep her at arm's-length
-- just a statistic rolled up into a huge column of numbers.
In the legend of chess, the king retained his kingdom and his honor
by assuring the inventor that his reward would be paid, but insisted
that the inventor must count every single grain himself to make sure
that he is not being cheated. Likewise, we have to start paying
attention to every single visitor and figure out ways to make her
online shopping experience better than the next site, only a click away.